May 27, 2016

Homework Help: Business

Posted by Ariana on Monday, May 17, 2010 at 11:59pm.

The U.S. cigarette industry has negotiated with Congress and government agencies to settle liability claims against it. Under the proposed settlement, cigarette companies will make fixed annual payments to the government based on their historic market shares. Supposed a manufacturer estimates its marginal costs at $1.00per pack, its own price elasticity at -2, and sets its price at $2.00. The company’s settlement obligations are expected to raise its average total cost per pack by about $.60. What effect will this have on its optimal price?

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